Sorry MSFT Stock Investors – Xbox One Sales Aren’t That Great

by Adam Benjamin | December 6, 2013 9:15 am

Sorry MSFT Stock Investors – Xbox One Sales Aren’t That Great

Microsoft (MSFT[1]) stole headlines with its newest video game console, which launched two weeks ago. And now, everyone’s scrambling to break down the numbers for Microsoft Xbox One sales and compare them to the PlayStation 4 launch.

[2]So far, we haven’t seen a whole lot[3] in the way of concrete numbers for Xbox One sales. What we have seen, though, appears positive at first glance. MSFT has been trumpeting Xbox One sales numbers and other stats as proof that the new console is a success.

But MSFT stock holders shouldn’t get too excited. While the Xbox One sales numbers aren’t bad by any means, they’re also not as great as they seem.

Here’s what we know about the Microsoft Xbox One, and why the info is not as good as it seems for MSFT stock.

Why it seems good: Microsoft was quick to announce that Xbox One sales exceeded 1 million consoles in the first 24 hours of launch. That put the Microsoft Xbox One right on pace with Sony’s (SNE[4]) PS4, and showed strong demand for the console.

Why it’s not as good as it seems: We already knew this would happen. Pre-orders for the PS4 exceeded 1 million too. And in the days leading up to the Xbox launch, developers for the Microsoft Xbox One insisted that pre-orders were just as high for their console. Sure, this is still good news, with Xbox One sales showing that the new MSFT console could match the PS4 … but it’s old news. MSFT stock already reflects that status.

Xbox One Sales – Microsoft Xbox One Breaks Xbox 360 Sales Record

Source: Flickr[5]

Why it seems good: After the launch, MSFT announced that Xbox One sales “[surpassed] day one Xbox 360 sales and [set] a new record for Microsoft.” That seemed to prove that demand for the Xbox One was even greater than it was for the 360, which was the top-selling console for more than two years[6] (until the PS4 launch).

Why it’s not as good as it seems: While it’s possible that Xbox One demand is greater than the 360’s was at launch, first-day sales really come down to one thing: distribution. The fact that MSFT boasted more Xbox One sales in the first 24 hours simply means that they were more efficient in producing and shipping the consoles than they were for the 360. That doesn’t necessarily mean Xbox One sales will continue with that momentum, or that it will help MSFT stock investors.

Xbox One Sales – Microsoft Xbox One Sells Out Worldwide

Why it seems good: Everybody wants one! The fact that the console is selling out across the world means gamers have forgiven MSFT for its DRM missteps, and are snapping up the console in countries across the world.

Why it’s not as good as it seems: It’s probably not true. The methods are far from scientific, but early investigations[7] suggest that plenty of retailers still have some Xbox One consoles in stock. So even if Microsoft Xbox One sales numbers are strong, MSFT is being misleading with its reports.

Xbox One Sales – Microsoft Xbox One Outsells PS4 on Black Friday

Why it seems good: Black Friday is the day when shopper-gladiators around the U.S. prepare to battle to the death for the discounted items they want most. And if Xbox One sales beat out the PS4[8] on Black Friday, surely that must mean that consumers prefer the MSFT product.

Why it’s not as good as it seems: Except it doesn’t mean that at all. As Infoscout noted in its report, the discrepancy in sales is likely a result of PS4 being less widely available than the Xbox One. In other words: Xbox One sales beat the PS4 on Black Friday because people had already bought all the available PS4 consoles. Thus, this actually appears to be a negative sign for MSFT stock holders, not a positive.

Xbox One Sales – The Bottom Line for MSFT Stock

Xbox One sales aren’t worrisome by any means. Consumers are buying up consoles almost as quickly as MSFT can produce them. However, most of the sales activity so far has been expected: Barring a PR disaster (which Microsoft came closer to than MSFT stock investors probably would have liked), hardcore gamers were going to snap up the Xbox One at launch.

The real test will be what happens in the next year, as demand and supply swap places. Will people keep buying once the Xbox One is readily available on store shelves? Will problems with party chat[9] and faulty disc drives[10] slowly drive gamers toward the PS4?

MSFT stock investors will have to wait around and see. But the biggest battles for the Xbox One still lie ahead.

As of this writing, Adam Benjamin is an Assistant Editor at InvestorPlace. As of this writing, he did not own a position in any of the aforementioned securities, nor does he own an Xbox One.